Daily State of the Markets 8/5: Modest At Best?
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Good morning. Stocks have been moving up lately on the back of what appears to be a general improvement (albeit modest) in the data. Just a short time ago (June to be exact), the perception was that the economy was heading toward a cliff, Thelma and Louise-style. But then, starting in Europe of all places, we started to see some reports coming in above expectations.
Yes, housing is still lousy, the jobs market is a bust, and there are still more than a few macroeconomic concerns out there. But the bottom line is that by the end of June the expectations bar on the economic front had been lowered to the point where it may have been laying on the ground. And as most traders know, this game is about expectations versus reality. So, with the data coming in above those all-important consensus expectations, well, stocks just had to rise.
To be sure, this game remains all about the data. And at some point, maybe even soon, the data will begin to disappoint. But for now, the word "increasing" seems to be showing up with regularity in the economic data. For example, on Wednesday we learned that the ISM Non-manufacturing (which is an economist's way of saying the services sector) Index unexpectedly increased in July. Within the report, the word increasing could also be found in front of the New Orders component as well as the Employment index.
Speaking of Employment, this seems to be the theme of the week as we got ADP's report on the subject Wednesday; we'll get Initial Jobless Claims this morning; and then on Friday, we get the Big Kahuna, the Nonfarm Payroll numbers - aka the Jobs Report. ADP got things started off on the right foot as private sector job growth - wait for it - increased by more than had been expected (42K vs. 28.3K).
Sure, the increases we've been seeing lately are modest at best, but they do seem to be heading in the right direction at the moment.
The problem is that modest increases will only cut it for so long. At some point, we will need to see substantive increases if stocks are to continue rising. At some point, we will need to see demand pick up, the money supply expanding, and real job growth. But unfortunately, none of those things appear to be in the cards any time soon. Therefore, we should enjoy our modest increases in the data right now because without those increases becoming more robust, the upside in the stock market is likely to also be modest at best.
Turning to this morning... Although there was some decent economic data out of Germany and we've got the monthly flood of the retailers' same-store sales numbers to wade through, all eyes remain on the jobs situation. And while the big report is tomorrow morning, we do have the weekly jobless claims numbers this morning.
On the economic front... The Labor Department reported that initial claims for unemployment insurance for the week ending July 31 rose by 19,000 to 479K. The week’s total was 22K above the Reuters consensus for a reading of 457K. Continuing Claims for unemployment for the week ending July 24 were above consensus at 4.537M vs. expectations for 4.523M and last week’s 4.571M.
Finally, don't forget to check the happiness box today...
Pre-Game Indicators
Here are the important indicators we review each morning before the opening bell...
Major Foreign Markets:
Australia: +0.55%
Shanghai: -0.67%
Hong Kong: +0.01%
Japan: +1.73%
France: +0.48%
Germany: +0.52%
London: +0.17%
Crude Oil Futures: - $0.53 to $81.94
Gold: + $4.90 to $1200.80
Dollar: higher against Yen, lower vs. Euro and Pound
10-Year Bond Yield: Currently trading lower at 2.93%
Stocks Futures Ahead of Open in U.S. (relative to fair value):
S&P 500: -5.31
Dow Jones Industrial Average: -35
NASDAQ Composite: -3.75
Wall Street Research Summary
Upgrades:
Savient Pharmaceuticals (SVNT) - BofA/Merrill
Martin Marietta Materials (MLM) - UBS
Regis (RGS) - Soleil Securities
Sirius XM Radio (SIRI) - Wunderlich
Downgrades:
Allegheny Energy (AYE) - Barclays
Thomson Reuters (TRI) - Deutsche Bank
Martin Marietta Materials (MLM) - Goldman
Cameron Intl (CAM) - Removed from Conviction Buy at Goldman
Vulcan Materials (VMC) - Goldman
Rayonier (RYN) - JPMorgan
Cognizant Technology (CTSH) - Morgan Stanley
Comstock Resources (CRK) - Oppenheimer
Con-way (CNW) - Stephens
Jack In The Box (JACK) - SunTrust Robinson Humphrey
CBL & Associates (CBL) - UBS
HCP (HCP) - UBS
Earnings After the Bell
Allstate ALL $0.81 v. $0.68
Health Care REIT HCN $0.80 v. $0.80
Hartford Financial HIG $0.92 v. $0.71
Murphy Oil MUR $1.41 v. $1.21
News Corp NWSA $0.33* v. $0.20
Prudential Financial PRU $1.51 v. $1.31
Transocean RIG $2.22 v. $1.67
Earnings Before The Bell
Ameren AEE $0.73 v. $0.49
Cardinal Health CAH $0.50 v. $0.49
Cigna CI $1.38 v. $1.01
DIRECTV DTV $0.60 v. $0.60
Foster Wheeler FWLT $0.48 v. $0.51
Hewitt Associates HEW $0.60 v. $0.74
International Flavors IFF $0.85 v. $0.82
MetroPCS Communications PCS $0.22 v. $0.13
PPL Corp PPL $0.62 v. $0.67
Teradata TDC $0.44 v. $0.40
TECO Energy TE $0.35 v. $0.34
Time Warner Cable TWC $0.95 v. v. $0.93
Viacom VIA.B $0.68 $0.66
Windstream WIN $0.17 v. $0.20
Watson Pharmaceuticals WPI $0.83 v. $0.81
* Report includes items that make comparisons to the consensus estimate questionable
Long positions in stocks mentioned: RIG, TWC
For more "top stock" portfolios and research, visit TopStockPortfolios.com
The opinions and forecasts expressed are those of David Moenning, founder of TopStockPortfolios.com and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors of TopStockPortfolios and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. Stocks should always consult an investment professional before making any investment.
Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.
The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.
The information contained in our websites and TopStockPortfolios publications is provided by Ridge Publishing Co. Inc. (Ridge). One of the principals of Ridge, Mr. David Moenning, is also President and majority shareholder of Heritage Capital Management, Inc. (HCM) a Chicago-based money management firm. HCM is registered with the U.S. Securities and Exchange Commission as an investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Ridge is a publisher and has not registered as an investment adviser. Neither HCM nor Ridge is registered as a broker-dealer.
Employees and affiliates of HCM and Ridge may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice.
Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.
Yes, housing is still lousy, the jobs market is a bust, and there are still more than a few macroeconomic concerns out there. But the bottom line is that by the end of June the expectations bar on the economic front had been lowered to the point where it may have been laying on the ground. And as most traders know, this game is about expectations versus reality. So, with the data coming in above those all-important consensus expectations, well, stocks just had to rise.
To be sure, this game remains all about the data. And at some point, maybe even soon, the data will begin to disappoint. But for now, the word "increasing" seems to be showing up with regularity in the economic data. For example, on Wednesday we learned that the ISM Non-manufacturing (which is an economist's way of saying the services sector) Index unexpectedly increased in July. Within the report, the word increasing could also be found in front of the New Orders component as well as the Employment index.
Speaking of Employment, this seems to be the theme of the week as we got ADP's report on the subject Wednesday; we'll get Initial Jobless Claims this morning; and then on Friday, we get the Big Kahuna, the Nonfarm Payroll numbers - aka the Jobs Report. ADP got things started off on the right foot as private sector job growth - wait for it - increased by more than had been expected (42K vs. 28.3K).
Sure, the increases we've been seeing lately are modest at best, but they do seem to be heading in the right direction at the moment.
The problem is that modest increases will only cut it for so long. At some point, we will need to see substantive increases if stocks are to continue rising. At some point, we will need to see demand pick up, the money supply expanding, and real job growth. But unfortunately, none of those things appear to be in the cards any time soon. Therefore, we should enjoy our modest increases in the data right now because without those increases becoming more robust, the upside in the stock market is likely to also be modest at best.
Turning to this morning... Although there was some decent economic data out of Germany and we've got the monthly flood of the retailers' same-store sales numbers to wade through, all eyes remain on the jobs situation. And while the big report is tomorrow morning, we do have the weekly jobless claims numbers this morning.
On the economic front... The Labor Department reported that initial claims for unemployment insurance for the week ending July 31 rose by 19,000 to 479K. The week’s total was 22K above the Reuters consensus for a reading of 457K. Continuing Claims for unemployment for the week ending July 24 were above consensus at 4.537M vs. expectations for 4.523M and last week’s 4.571M.
Finally, don't forget to check the happiness box today...
Pre-Game Indicators
Here are the important indicators we review each morning before the opening bell...
Major Foreign Markets:
Australia: +0.55%
Shanghai: -0.67%
Hong Kong: +0.01%
Japan: +1.73%
France: +0.48%
Germany: +0.52%
London: +0.17%
Crude Oil Futures: - $0.53 to $81.94
Gold: + $4.90 to $1200.80
Dollar: higher against Yen, lower vs. Euro and Pound
10-Year Bond Yield: Currently trading lower at 2.93%
Stocks Futures Ahead of Open in U.S. (relative to fair value):
S&P 500: -5.31
Dow Jones Industrial Average: -35
NASDAQ Composite: -3.75
Wall Street Research Summary
Upgrades:
Savient Pharmaceuticals (SVNT) - BofA/Merrill
Martin Marietta Materials (MLM) - UBS
Regis (RGS) - Soleil Securities
Sirius XM Radio (SIRI) - Wunderlich
Downgrades:
Allegheny Energy (AYE) - Barclays
Thomson Reuters (TRI) - Deutsche Bank
Martin Marietta Materials (MLM) - Goldman
Cameron Intl (CAM) - Removed from Conviction Buy at Goldman
Vulcan Materials (VMC) - Goldman
Rayonier (RYN) - JPMorgan
Cognizant Technology (CTSH) - Morgan Stanley
Comstock Resources (CRK) - Oppenheimer
Con-way (CNW) - Stephens
Jack In The Box (JACK) - SunTrust Robinson Humphrey
CBL & Associates (CBL) - UBS
HCP (HCP) - UBS
Earnings After the Bell
Allstate ALL $0.81 v. $0.68
Health Care REIT HCN $0.80 v. $0.80
Hartford Financial HIG $0.92 v. $0.71
Murphy Oil MUR $1.41 v. $1.21
News Corp NWSA $0.33* v. $0.20
Prudential Financial PRU $1.51 v. $1.31
Transocean RIG $2.22 v. $1.67
Earnings Before The Bell
Ameren AEE $0.73 v. $0.49
Cardinal Health CAH $0.50 v. $0.49
Cigna CI $1.38 v. $1.01
DIRECTV DTV $0.60 v. $0.60
Foster Wheeler FWLT $0.48 v. $0.51
Hewitt Associates HEW $0.60 v. $0.74
International Flavors IFF $0.85 v. $0.82
MetroPCS Communications PCS $0.22 v. $0.13
PPL Corp PPL $0.62 v. $0.67
Teradata TDC $0.44 v. $0.40
TECO Energy TE $0.35 v. $0.34
Time Warner Cable TWC $0.95 v. v. $0.93
Viacom VIA.B $0.68 $0.66
Windstream WIN $0.17 v. $0.20
Watson Pharmaceuticals WPI $0.83 v. $0.81
* Report includes items that make comparisons to the consensus estimate questionable
Long positions in stocks mentioned: RIG, TWC
For more "top stock" portfolios and research, visit TopStockPortfolios.com
The opinions and forecasts expressed are those of David Moenning, founder of TopStockPortfolios.com and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors of TopStockPortfolios and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. Stocks should always consult an investment professional before making any investment.
Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.
The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.
The information contained in our websites and TopStockPortfolios publications is provided by Ridge Publishing Co. Inc. (Ridge). One of the principals of Ridge, Mr. David Moenning, is also President and majority shareholder of Heritage Capital Management, Inc. (HCM) a Chicago-based money management firm. HCM is registered with the U.S. Securities and Exchange Commission as an investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Ridge is a publisher and has not registered as an investment adviser. Neither HCM nor Ridge is registered as a broker-dealer.
Employees and affiliates of HCM and Ridge may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice.
Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.
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